The national credit card delinquency rate (the rate of borrowers 90 or more days past due) dropped to 0.73% in the first quarter ended March 31, from 0.78% in the previous quarter, with current levels well below historical norms, according to TransUnion's Trend Data report.
Average credit card debt per borrower decreased $242 to $4,962 at the end of the first quarter compared to the previous quarter. These decreases reversed a trend that saw both the delinquency rate and average debt per borrower rise during the last six months of 2011.
The national delinquency rate year-to-year was flat while the average debt per borrower increased $283.
“After two consecutive quarters of increases in both the delinquency rate and average debt, it is encouraging to see a return to declines in delinquency,” says Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “This contributed positively to a general trend since the bottom of the recession, which saw delinquency rates remain at near-record lows.
"Trends in average debt year over year suggest that little more than the usual seasonal influence is behind these changes. Since we rarely see significant increases in either category at this time of the year, this movement isn’t significant enough to suggest much more than a return to the status quo of early last year.”
TransUnion's Trend Data report is part of its series of quarterly analyses of credit-active U.S. consumers, evaluating how they are managing credit related to mortgages, credit cards and auto loans.
Total card originations in 2011 grew by more than 20% compared with 2010.
“The influx of sub-prime lending we saw from previous quarters continued in Q1 2012, but demand for new card originations also picked up among prime and super-prime consumers,” Becker says. “The good news is that increased lending, particularly to non-prime borrowers, hasn’t affected delinquency rates, which have remained unchanged over the past year. Bank cards are one of the most important assets for consumers, and it is evident consumers have been working hard to stay current on their cards and to maintain access to this important financial tool.”
In the first quarter, only three states and the District of Columbia saw increases in their credit card delinquency rates. On a more granular level, 28% of metropolitan statistical areas (MSAs) saw increases in their respective credit card delinquency rates in the first quarter. This was down compared to last quarter, when 79% of MSAs experienced an increase.
“We continue to see improvements in high-risk states such as Arizona, California, Florida and Nevada,” Becker says. “It is heartening to see this rebound in some of the states hit hardest by the recession.”
While average credit card debt-per-borrower decreased $242 quarter over quarter, the decline can be attributed to normal seasonal fluctuations, as consumers charge holiday shopping purchases on their cards in the fourth quarter and pay them down in the first quarter through tax refunds and bonuses. However, on a year-over-year basis, average credit card debt-per-borrower increased 6.1%.
“This year-over-year increase in average card debt-per-borrower could be anticipated based on the strong growth in new card originations over the past year,” adds Becker. “This growth is an indication that consumers are more confident in the economic outlook and are more comfortable charging purchases on their cards."
Based on current economic assumptions, TransUnion is holding to previous forecasts for credit card delinquencies to remain near current levels, with potentially some seasonal fluctuations, through the end of 2012. This forecast is based on seasonality effects and various other economic factors such as anticipated gross state product, consumer sentiment, disposable income and employment conditions.
The forecast changes as the economy deviates from a conservative economic forecast, or if there are unanticipated shocks to the economy affecting recovery.